What to do if you get declined for credit

Posted by Kelly Luff in Declined Credit on 16 March 2017 - Kelly is a Marketing Executive at checkmyfile

Have you been declined credit lately? When you apply for a new credit card or a loan, it is likely that you have the money earmarked for something in particular. Perhaps it’s a wedding, a holiday, or consolidation of existing debts. But whatever your reason for borrowing, being declined for credit can really throw you into a panic, especially when you have no idea why you weren’t accepted.

What should you do when you are declined for credit?

1. Don’t panic The most important thing you can do when you are declined is not to panic and apply with lots of different lenders. Whilst it may seem like the most obvious thing to do - spread the risk and hope one comes out favourably - it doesn’t give you any idea as to why you were declined in the first place. This can then lead to you being declined again, or being offered a much less favourable rate for borrowing.

2. Speak to the lender The lender you applied with may be in a position to offer you an idea of where the application went wrong, but often the answer is simply “computer says no”. If this is the case, you can look to make some checks for yourself prior to applying again with a different lender.

3. Re-check your application Initially it’s worth looking at the application form itself. Was anything entered incorrectly? Did you miss some information that may have impacted on your being accepted? Or conversely, did you wildly exaggerate your salary or play down your current debt levels?

Application forms can be tedious at the best of times, but if you missed out a crucial section or entered a figure to the incorrect decimal place, you could find yourself being declined over human error. At this point, you may want to contact the lender directly, to find out if there is any opportunity to have your application reassessed with the correct information.

4. Check the lending criteria Once you’ve checked the application, also have a look at the criteria of lending. Whilst many lenders are fairly all-inclusive, you may see that there was a minimum salary requirement, or that only those with a certain level of employment would be accepted. If you are aware of any adverse credit history such as defaults or arrears you may also find that many mainstream lenders will be more likely to decline you. Checking this can then ensure that any future applications can be checked in a similar way.

5. Check your credit report If there is nothing wrong with your application and you had all the requirements needed to be accepted, the next check is with your credit report. Checking with all agencies is best, as you can never be sure which lender uses which agency, and if there is an error with one agency it may not be showing on all of them.

Going through each element of your credit report is best, and using a tool like checkmyfile can make life easier as you see more data on one page. Checking that your account history, your Electoral Roll inclusion and your financial associations are correct, and that you haven’t had huge numbers of credit searches within a short space of time can make the difference between being accepted and being rejected.

6. Don’t keep applying for credit Again, this is where not applying willy-nilly is important – lenders can see when other lenders have performed credit searches via your credit report. If you are making lots of applications, there is a chance that lenders could think that you are in desperate need of the money and are therefore more of a risk to them in terms of your financial security. You think you are being savvy – they think you are desperate for cash.

7. Check your current debt levels Lenders will also use your current debt levels on your credit report to decide if you are over-indebting yourself, particularly when your salary and income will often be included as part of your application. If you want to borrow £10,000 but already have £15,000 in unsecured debt and an income of £18,000, for instance, this could ring alarm bells to the lenders, who like to see no more than 30-50% of credit limits utilised where possible.

8. Make sure you have some credit history Equally, if you have very little credit history to show lenders how you manage your finances, they can also deem you more of a risk, so there really is a balance that they like to generally see to encourage your application to be accepted.

Once you have all the information to hand, you can then look at every aspect of your application and credit history, to see what has gone wrong. If you find an error, contact the relevant party to correct it, and wait for this to be changed if possible before applying again.

9. Make an informed decision when reapplying If you can’t see any problem with your application or credit report, perhaps wait for a certain period (lenders don’t like to see more than 1-2 applications for credit a month) before applying again with a different lender, and perhaps think about a lender you already use such as your bank, who will be able to give you more guidance through the process.

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